Justice should be free. However, the State of California has just cut the budget of its court system by more than $500 million! Litigants will be left to fend for themselves. One blogger suggests that private judges are not expensive when comparing the speed of justice in a private matter with the delays and increased costs of the public judicial system.
In the 1960s and 1970s, the State of California began changes to its pension system, which culminated in a major change in 1994. Judges elected or appointed before that year could with qualifications retire as early as age 60 at 75% of salary, but if they stayed on the bench after age 65 the percentage went down. Judges who assumed their jobs after 1994 got a further reduction. Many of these judges found it more advantageous to retire and hire themselves out as private judges. Thus began the two-tier system of justice, one for the rich who could afford to move quickly with a private judge, and the other for everyone else.
The recent budget cut further exacerbates the problem by giving incentives to even more people (who can afford it) to enter into the private judging world … a boon for them and a catastrophe for the average citizen with an average matter who can’t afford the added expenses of a private judge.
Our Constitution says everyone is entitled to right to counsel. In at least one instance, this applies to civil matters as well as criminal matters. Shouldn’t this right also include that everyone is entitled to the right to be judged by a competent and objective individual, paid by the state? Private judging sounds too much like the old vigilante justice. Am I unfair when I ask whether these judges will be influenced by which lawyers use their services more? If this is a question raised in my mind, I wonder what the litigants might wonder …. And that is not how justice ought to be delivered or viewed.
As a postscript, there are already those who predict that the national system of health care under the now-validated Affordable Care Act will lead certain physicians to opt out of the system and care only for wealthy individuals who can afford them. Would such doctors refuse to see or treat a patient who could not demonstrate the required level of net worth?
Lincoln famously observed that a house divided against itself cannot stand. Ultimately the same can be said about a society divided against itself, between those who can pay and those who can’t.
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In the Wall Street Journal, staff writer, Jacqueline Palank discusses the Justice Department’s attempt to control fees that bankruptcy lawyers seek. Creditors and employees may, at times, be a bit disgruntled by such fees. So, now, the U.S. Trustee Program appears to be entering the fray.
Before going further, it should be noted that i) any fee sought by an attorney must first be approved by the client going into bankruptcy; ii) the fee cannot be paid before a Bankruptcy Court Judge approves the fee request; iii) the legal fees most often are a pittance compared to the debts of the company and thus have little or no impact on either the creditors or the employees. In fact, the current proposal is limited to companies whose assets and debts exceed $50 million, hardly your “normal” bankruptcy.
The only reason for focusing on the legal fees is that this is a topic that makes good reading in the tabloids, including the WSJ. While the quoted hourly rate received by some attorneys seems high, it is insignificant in comparison to the compensation received by incompetent CEOs and others in the C-suite offices. Why don’t the tabloids focus on the cause of the bankruptcy? Why not focus on the compensation of the management team, which often is at astronomically higher multiples compared the lowest paid employees of the company? Why not seek redress against the management that is responsible for bringing the company to its knees? Although this focus may have more positive economic impact, it clearly is not sexy enough to sell many papers.
The U.S. Trustee is proposing, according to the writer, several new approaches to control lawyers’ fees, including:
• Though the lawyer applicant must disclose his/her hourly rate now, the Justice Department wants the lawyer to disclose the lowest, highest and average hourly rates the law firm charges in all its matters.
• The Department wants the lawyer applicant to create and disclose to the Court a budget for legal expenses. This budget would, necessarily, disclose to all involved, including the creditors who are adversaries of the bankrupt, the client’s planned legal strategy.
In the 1960s, the Supreme Court ruled that it was anti-competitive for bar associations to maintain a listing of suggested fees for different types of work. Such a listing, in particular, helped younger and newer lawyers set their fees at rates that were more in line with more senior lawyers. Not having such a list would compel lawyers to set their own fees, the theory being that lawyers would then be more competitive with one another to the consumers’ benefit. The Trustee by its first proposal ignores this. The existing disclosure already provides information that tends to be anti-competitive. Law firms can see what others are charging and price their own services accordingly, causing rates to slowly increase in lockstep over the years.
Intruding into the fees charged for practice areas, such as general business matters, estate planning, tax work, and other areas of work performed by the firms who also do bankruptcy work has no bearing on the special expertise of large company bankruptcy lawyers. No area of law other than bankruptcy requires such disclosure for court approval. Fees are left to be negotiated between attorney and client. Other than precedent, there is no reason disclosure should be made here either and the process should not be extended. “Transparency” is a bogus issue. There is no backroom conspiracy on how bankruptcy fees are charged. All the proceedings are public and must be approved by the Court before attorneys are paid anything.
Budgets are good. I recommend them to my attorney-clients with whom I consult. Budgeting is a process, however, between the client and the attorney. By requiring that bankruptcy budgets, which reveal legal strategy, be made public, the U.S. Trustee is saying that bankrupt companies have no rights. They have no right to advocacy; they have no right to develop a strategy that might affect creditors’ claims; and they have no right of confidentiality. This is clearly contrary to the U.S. Constitution and our entire judicial system. While the bankrupts, and their inept management, may have proceeded down an economically unwise path, they still have rights to seek the best windup of affairs in their economic environment.
Don’t worry about the lawyers’ hourly rates once the bankruptcy petition is filed. They are regulated first, by the client, and second, by the Court. Who is watching the compensation of the management team before the company entered bankruptcy? Why are inept executives not punished with fines, or worse, for malfeasance and negligent management tactics? Why are they allowed to benefit so expansively at the expense of their workers? Why don’t the tabloids focus their sharp light there? Oh, I forgot, the tabloids need to sell papers, they are part of the industrial complex that both Presidents Washington and Eisenhower warned us about as they left office. Perhaps the fact that quite a few newspapers and newspaper chains (Tribune Co. and papers in Detroit, Denver, Minneapolis, Philadelphia and many other cities) have been mismanaged and had to file for bankruptcy has something to do with it, too.
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